Practical Improvement of Productivity in Russian Businesses AEB - - PowerPoint PPT Presentation

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Practical Improvement of Productivity in Russian Businesses AEB - - PowerPoint PPT Presentation

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Practical Improvement of Productivity in Russian Businesses AEB Working Group on Modernization & Innovations October 29, 2018 Aage V. Nielsen Moscow Mang. Dir. & Senior Partner 1 Lovely child has many names: Productivity

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Practical Improvement of Productivity in Russian Businesses

AEB Working Group on Modernization & Innovations

October 29, 2018 Aage V. Nielsen Moscow

  • Mang. Dir. & Senior Partner

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Lovely child has many names:

  • Productivity
  • Efficiency
  • Quality management
  • Toyota Model
  • Lean Management
  • Business Performance Improvement
  • Business Process Re-engineering
  • Change management
  • Etc. Etc.

= All part of the same!

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Why focus on Productivity?

  • Russian growth 1998-2012: Investments & consumption

– Money from oil, gas & other raw materials

Issues:

  • Cyclical economy, Rouble ≈ Oil & gas price
  • Raw material economy
  • Russia not harvesting on its big HR capital
  • Balance: Investments ≈ HR Capital

Future: ‘Mixed Economy’ (IMF, WB, Min Econ Dev, CBR, + other clever Organisations & Russians)

  • Sustainable domestic growth – Improve productivity!!!

– Productivity gap (WB): Approx. 3.0 x OECD average – Energy Efficiency gap (IEA/OECD): Approx. 2.7 x OECD average

  • Policies supporting transformation
  • New Budget Rules

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Aage V. Nielsen

  • Education:

– Student, Aarhus Katedralskole, Denmark – Cand. Scient. Pol., Aarhus Universitet, Denmark – DAES, Diploma of Advanced European Studies, Economics, College of Europe, Brügge, Belgium

  • Experience with Russia, 1987-Now

– Rebild Marketing Management, (BakConsult), 1985-92, Copenhagen – PA Consulting Group, Mang Dir, Moscow, Russia & CIS, 1992-94 – Arthur D. Little International, Sales & Buss Dev Dir, Moscow, 1994 – Vitus Bering Management, Moscow, 1995-Now

  • AEB, Association of European Business in RF, 1997-Now
  • DBC, Danish Business Club, 1997-2006, 2016-Now
  • Business Performance Improvement Russia

– USSR & Russian enterprises, First project 1989 – European & Scandinavian subsidiaries, First project 1994

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Business Performance Improvement

Business Performance Improvement

  • Short Term - Business Performance Improvement

Quality & lean management Technology & Products Energy Efficiency & Renewable Energy Technologies

Business Development

How and how NOT to do business in Russia Entrance strategy and market penetration Sales /marketing /distribution Business model & set-up incl. establishing production

HR Management & Development

Corporate structure & organization Coaching, training & development Recruitment & Executive Search Management assessment & testing

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Business Analysis

Pre-Feasibility studies and Feasibility studies Markets Research & Analysis Qualitative market research – Interviewing customers, distributors, suppliers, etc. Fact finding visits Benchmarking and analyses: Competitors, operational and costs efficiency, best practice in industry, etc.

www.vitusbm.ru

Contacts: Aage V. Nielsen Managing Director & Senior Partner Mobile: +7-985-764 3664, aage@vitusbm.ru Denmark: Ivan Häuser Associated Partner Mobile: +45-4034 2496, ih@ivan-hauser.dk Julia Nielsen-Reznik General Director & Partner Mobile: +7-985-764 3057, julia@vitusbm.ru Sweden: Dan Larsson Associated Partner Mobile: +46-767 681 6000, dan.larsson@capd.se

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VBM - Business Performance Improvement Fundamental idea & concept:

  • Start improve from what you have
  • Start from tomorrow
  • Management, operational management, team

management

  • Procedures & policies, processes & systems
  • Change for doing better now & speedy
  • Improve cash-flow from Day-1
  • Generate cash for further improvements &

investments

  • Very ‘Hands-on-approach’
  • VBM-team: Former/Existing CEOs, COOs, other line-

managers

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Business Performance Improvement (contd.)

  • Improvement opportunities & Action Plan

– How fast contribute to improvements – Resources & costs needed for implementation – Improved cash-flow

  • Short Term Improvement
  • Turn-around program

0-9 (12) months 9-18 months 18+ months Time Improvements

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Investments: Close to 0 Max 12 month pay-back Contribute to improvements

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Case 1 – Building Materials

Full-scale Buss Perf Improvement: Production, Sales & Distribution:

  • Bought plant with 1,200 employees
  • High-down time & unplanned shot-downs & lot of “waste-

products”

  • Cultural conflict – “old” versus “new” staff
  • CEO: “When I turn left, wheels turn right!”

Main findings:

  • “War”: Production & maintenance ≈ 20-30% loss in production
  • Communication barriers/filters & discretionary bonuses
  • Operational management logistics & stock

Results:

  • Overall productivity increased 30% first 12 months
  • +25% higher revenue – Quality improved + production loss

reduced

  • Motivation of managers & staff: +30%

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Case 2 - Facility Service

Full scale Turn around (Short Term BPImp):

  • Bought facility service company, 1,300 empl & 10% net profit
  • Changed for IAS: Net profit down to -18%

Main findings:

  • Contracting & calculation process ‘flawed’
  • Many customers ‘grey & black’
  • Lack of critical mass business (several oblasts)
  • Business Processes – many loops

Results:

  • Improved service proposition – higher contract contribution
  • Focus on ‘White’ customers – no lossmaking contracts!
  • Improved contracting & calculation process ≈ +10% profit points
  • Improved business processes & systems: Optimization &

Efficiency

  • Year 1 (15 months): Net profit 0%, Year 2: +8%

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Observations from Business Performances in Russia

  • International management skills & culture +

Russian engineers = Winner!

  • New generation of young Russian

professionals & managers know how to improve productivity!

– Will be allowed?

  • No excuse for not improving productivity!

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Observations Business Performances in Russia Productivity improvement challenges:

  • Owner Role versus Executive Management Role

– Often messy – lowering productivity

  • New Top-Manger – clean the ‘Chess board’

– Often huge loss of knowledge & experience

  • Organization, management culture & style:

– Many management layers (≈2.5 times EU) – Lead by example? – Better than stick & threats – Businesses processes – defined & clear? – Delegate responsibility?

  • Top-Down culture & low cross-functional communication

– Mistakes not accepted – Learn from mistakes – Penalties & discretionary bonus is demotivating – Middle management & operational culture and skills

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Observations Business Performances in Russia Productivity Improvement challenges (contd.):

  • Russian suppliers’ performance very big issue

– OEMs need to go for foreign suppliers

  • Production Quality & Efficiency:

– Improve operations (make same high quality every time delivered at time) – Operational skills + Standard processes & procedures

  • Industry & agriculture

– Training of operators, foremen and group/team leaders

  • Improve performance of existing equipment &

resources versus “New toys”

  • Service & maintenance improvement:

– Costs up to 35+% reduction in production efficiency – Reduced product quality

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Improving productivity – External issues:

  • Corruption, state companies >60% of GDP, weak

judiciary, etc.

  • Increase competition
  • Attract more FDIs
  • Facilitate Innovation & good ideas
  • Facilitate transition from innovation to business
  • Facilitate and grow SMEs & Entrepreneurs

– Improve safeness & reduce bureaucracy

  • Improve external financing infrastructure
  • Etc.

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Thank you for your attention! Questions?

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